Blackberry: Turning Around?
Board: Value Hounds
Blackberry (BBRY) Formerly Research in Motion
New partnership with Foxconn, a joint development manufacturing agreement. Foxconn will provide: supply chain, economies of scale, logistics, fast turnaround hardware design, efficiency, fixed costs, some of the risk of excess and obsolete inventory (it will be built into the product cost that BBRY pays to Foxconn). BBRY will provide software, the brand, operating system and only design enterprise handsets. BBRY will no longer pay for fixed costs or inventory exposure. Both will collaborate on distribution. First joint product will come out in April: a 3G device based on BB10 operating system.
Competitive advantage: only BBRY provides end-to-end security. In DoD and in NATO. Focusing on this regulated vertical.
Blackberry Enterprise software (BES) and services:
Sells mobile device management as server licenses. 80,000 subscribers, more than anyone else. Moves more secure data than anyone else. New BES10 supports multi-platform Multiple Device Management (MDM) for Bring Your Own Device (BYOD), mobile application management and security. Offering free trials to test BES10. 31,000 companies using BES10 servers, up from 20,000 last quarter. Not a venture capital backed Mobile Device manager (MDM) player seeking additional funds every year.
BlackBerry Messenger (BBM):
Cross platform messaging, opened up for Android and iOS in the last Quarter. Expect revenue by FY16. 80 million active users a month. 60% of those active users use it daily, versus 50% for Instagram users. BBM users use it 90 minutes a day on average, more than any other. BBM is in investment mode, it is like a start-up company, investing and building out more features and channels.
Embedded, machine-to-machine (M2M) business unit (QNX)
Dominates the automotive industries, 40 OEMs in all kinds of cars. Plan is to grow in other verticals. Will build a cloud-based platform, that is going to be machine-to-machine based. M2M is the next frontier. We already are in that space and we have the basic technology for it.
Will be cash flow neutral from operations towards the end of FY15. Profitable in FY16.
Security is paramount, BBRY enterprise software has more certifications from government agencies than anyone else. The only one with Department of Defense “Authority to Operate” certification.
CitronResearch report (released 1/17/14):
BBRY is heavily shorted. The short thesis is that BBRY is a failed handset brand. It has misguided leadership. The short thesis is flawed. Foxconn will make handsets for BlackBerry at plants in Indonesia and Mexico, inventory risk has been eliminated for blackberry. BBRY is now mainly an enterprise software company. New CEO, as of Nov 2013, is John Chen. Chen turned Sybase around when it was almost bankrupt, ran it profitably for 55 quarters, then sold it to SAP for $5.2B. Strong balance sheet. Cash and equivalents $3.45B. Announced a huge write-down on the handset business on Dec 20. Ample liquidity to execute its turnaround strategy. Street estimates say cash flow will stabilize within the next few quarters. But investors are still looking at Blackberry as a device business.
Video: CEO Jon Chen interview on CNBC 12/20/13:
BBRY wants to be an end to end secure solution for enterprises. You can use any handset, but if you use the Blackberry handset, it will be the most secure. We had problems in the consumer business but enterprises still love us. This is a lot more than just managing mobile devices. It is about identity management, transaction management, productivity management. Blackberry Messenger is the most secure messaging environment there is.
Blackberry, the Way Forward: Interview with John Chen, CEO, 12/30/13
In less than 2 months: Developed a new strategy to stabilize the company, return to our core strength in enterprise and security, and maximize efficiencies. Hired new management in enterprise, corporate development & strategic planning, and marketing. We are the most secure, the leader in enterprise with 80,000 customers. 3 times the number of customers than competitors Good Technologies, AirWatch and MobileIron combined.
Form 6-K, Q3:
Q3 Conference Call transcript:
CEO's letter to enterprise customers: